Goldman Sachs raises target for CSI 300 to 5,300 points, clearly bullish on A-shares

Goldman Sachs, in its latest Asia equity strategy report, significantly increased the 12-month target level for the CSI 300 index to 5,300 points, implying an approximate 9% price upside compared to the current level, with a total return expectation of 13% in US dollar terms. The firm also explicitly stated "strong overweight China," and judged the investment value of A-shares to be significantly superior to H-shares.

Goldman Sachs pointed out that A-shares are currently experiencing a trio of resonance across fundamentals, policy, and capital flows. On the fundamental front, after 41 months of deflation, China's PPI has turned into positive growth, pushing market consensus to increase the 2026 earnings growth forecast for A-shares from 16% to 23%.

From a capital perspective, Chinese households have accumulated ample excess savings, and A-shares currently offering a 4% total shareholder return are attracting residents' funds to accelerate market entry. In addition, overseas investors entering A-shares through swap agreements can earn a positive financing spread, further improving the risk-return structure for going long on A-shares.

Regarding the judgment that A-shares are superior to H-shares, Goldman Sachs provided an explanation from the perspective of index structure. Approximately 37% of the weight in the MSCI China Index is concentrated in software tech stocks – Tencent accounts for 14%, Alibaba accounts for 11%, and Pinduoduo accounts for 3%. Amid the current global capital's clear preference for hardware technology and selling off software technology, H-shares are facing significant headwinds in the short term. Goldman Sachs believes that these offshore internet giants need to deliver extremely strong earnings by late 2026 to regain capital favor.

In terms of sector allocation, Goldman Sachs advises investors to focus on three main directions: first, the AI hardware industry chain, including computing power infrastructure and semiconductors related to domestic supply; second, strategic emerging industries heavily supported by the "14th Five-Year Plan," covering advanced manufacturing, new energy, and biotechnology; third, capital-intensive, low-depreciation energy companies, which possess scarce physical production capacity and have a structural advantage under the expectation of "higher and longer" energy prices.

Regarding target levels, Goldman Sachs has set the forward price-to-earnings ratio for the CSI 300 at 15.0 times, and the 12-month target level for the MSCI China Index has been set at 95 points, corresponding to a forward price-to-earnings ratio of 13.0 times, implying a 22% total return in US dollars. The firm also raised the earnings growth forecast for the Hong Kong market to 16%, mainly benefiting from the improvement in the real estate market, increased activity in the capital market, and a recovery in retail sales.